Paul Krugman: For the love of carbon

It should come as no surprise that the very first move of the new Republican Senate is an attempt to push President Barack Obama into approving the Keystone XL pipeline, which would carry oil from Canadian tar sands. After all, debts must be paid, and the oil and gas industry – which gave 87 percent of its 2014 campaign contributions to the GOP – expects to be rewarded for its support.

But why is this environmentally troubling project an urgent priority in a time of plunging world oil prices? Well, the party line, from people like Mitch McConnell, the new Senate majority leader, is that it’s all about jobs. And it’s true: Building Keystone XL could slightly increase U.S. employment. In fact, it might replace almost 5 percent of the jobs America has lost because of destructive cuts in federal spending, which were in turn the direct result of Republican blackmail over the debt ceiling.

Oh, and don’t tell me that the cases are completely different. You can’t consistently claim that pipeline spending creates jobs while government spending doesn’t.

Let’s back up for a minute and discuss economic principles.

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For more than seven years – ever since the Bush-era housing and debt bubbles burst – the U.S. economy has suffered from inadequate demand. Total spending just hasn’t been enough to fully employ the nation’s resources. In such an environment, anything that increases spending creates jobs. And if private spending is depressed, a temporary rise in public spending can and should take its place. That’s why a great majority of economists believe that the Obama stimulus did, in fact, reduce the unemployment rate compared with what it would have been without that stimulus.

From the beginning, however, Republican leaders have held the opposite view, insisting that we should slash public spending in the face of high unemployment. And they’ve gotten their way: The years after 2010, when Republicans took control of the House, were marked by an unprecedented decline in real government spending per capita, which leveled off only in 2014.

The evidence overwhelmingly indicates that this kind of fiscal austerity in a depressed economy is destructive; if the economic news has been better lately, it’s probably in part because of the fact that federal, state and local governments have finally stopped cutting. And spending cuts have, in particular, cost a lot of jobs. When the Congressional Budget Office was asked how many jobs would be lost because of the sequester – the big cuts in federal spending that Republicans extracted in 2011 by threatening to push America into default - its best estimate was 900,000. And that’s only part of the total loss.

Needless to say, the guilty parties here will never admit that they were wrong. But if you look at their behavior closely, you see clear signs that they don’t really believe in their own doctrine.

Consider, for example, the case of military spending. When it comes to possible cuts in defense contracts, politicians who loudly proclaim that every dollar the government spends comes at the expense of the private sector suddenly begin talking about all the jobs that will be destroyed. They even begin talking about the multiplier effect, as reduced spending by defense workers leads to job losses in other industries. This is the phenomenon former Rep. Barney Frank dubbed “weaponized Keynesianism.”

And the argument being made for Keystone XL is very similar; call it “carbonized Keynesianism.” Yes, approving the pipeline would mobilize some money that would otherwise have sat idle, and in so doing create some jobs – 42,000 during the construction phase, according to the most widely cited estimate. (Once completed, the pipeline would employ only a few dozen workers.) But government spending on roads, bridges and schools would do the same thing.

And the job gains from the pipeline would, as I said, be only a tiny fraction – less than 5 percent – of the job losses from sequestration, which in turn are only part of the damage done by spending cuts in general. If McConnell and company really believe that we need more spending to create jobs, why not support a push to upgrade America’s crumbling infrastructure?

So what should be done about Keystone XL? If you believe that it would be environmentally damaging – which I do – then you should be against it, and you should ignore the claims about job creation. The numbers being thrown around are tiny compared with the country’s overall work force. And in any case, the jobs argument for the pipeline is basically a sick joke coming from people who have done all they can to destroy American jobs – and are now employing the very arguments they used to ridicule government job programs to justify a big giveaway to their friends in the fossil fuel industry.

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